HMV rescue firm Hilco to begin talks with global music giants

HMV rescue firm Hilco is set to begin negotiations with global entertainment suppliers and the chain’s landlords as soon as this week as it implements a blueprint to salvage the business.

The restructuring firm wants to rescue about half of the 220 stores in Britain.
It is aiming to mimic its business strategy in Canada that has seen it cut prices in the HMV stores it acquired in 2011 in order to compete with the internet and supermarkets.

Music firms including Universal Music, Warner and Sony are understood to be considering offering HMV an extended credit deal. This would allow it to buy CDs and DVDs from the firms, but pay for the purchases in instalments over an extended period.

Negotiations: Hilco wants to rescue about half of the 220 HMV stores in Britain

The companies are keen to see HMV survive since it provides an alternative to online retailers such as Amazon and digital downloading sites such as Apple’s iTunes, which give them much smaller margins.

Administrators at Deloitte expect to begin sending out information this week to interested parties that have signed non-disclosure agreements. These are understood to include dozens of retailers interested in packages of individual stores.

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Hilco has taken control of HMV’s £120million debt for just £40million. It will assist administrators until a deal is agreed. A further 16 stores are being run under a separate administration in Ireland. Hilco’s acquisition of the debt effectively gave it a controlling position.

Sources told Financial Mail that several other suitors had since decided not to pursue a deal for the core HMV business.
Hilco is understood to have been particularly keen to ensure the survival of key stores such as the Oxford Street flagship in Central London.

However, it closed HMV Canada’s massive Vancouver megastore and is understood to be taking a pragmatic view if stores are not profitable and it cannot agree terms with landlords. Sources said it could end up with 100 to 120 stores.

Universal Music is liable for the rent on 16 HMV stores as part of its £1.2billion purchase of EMI.
The music companies are understood to be waiting to hear from Deloitte before meeting Hilco, but all are expected to meet within the next month.

HMV was the last major music chain in Britain after the demise of Virgin Megastores, Our Price, Borders and Zavvi.

Previous managements at HMV have faced mounting criticism over the years for failing to cope with the rise of the online market.

HMV boss Simon Fox left in August after six years at the helm. At the time he said: ‘I am proud to be leaving HMV with a profitable future secured.’

It survived until Christmas, but by then new boss Trevor Moore admitted that it was struggling. It collapsed two weeks ago.
Administrators have agreed to honour £7million in gift vouchers.

However, holders are not automatically entitled to receive their money back if a retailer collapses into administration and it was initially feared that the vouchers may not be valid.